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Mechel Gets Fund Approval for Elga

Zacks Equity Research

Russian mining company Mechel OAO (MTL) announced that Vnesheconombank's (:VEB) Supervisory Board has approved its application for funding the development of its Elga Coal Complex, located in southern Yakutia. The VEB approved of a $2.5 billion financing for the completion of the first stage of the project.

The first stage will include construction of a railroad and a mining and washing complex with an annual capacity of 11.7 million tons of run-of-mine coal by 2017. The loan holds a tenor of 13.5 years with grace period until 2017.

Mechel has already invested over $2 billion in the project over the past 5 years and with the help of VEB funds the company will be able to provide the required coal to its customers. Mechel has the requisite facilities including its own wagon fleet, port facilities in the Far East and long-term contracts with major international steelmakers.

The project is expected to create about 5,000 new jobs. With the project, Mechel intends to create an industrial cluster that will cater to the economic growth of the entire region. Elga is one of the world's as well as Russia’s largest deposit of high-quality coking coal.

Last month, Mechel also announced that it has begun supplying coal concentrate to the People's Republic of China by rail through a new border checkpoint. The route from Makhalino in Russia goes to Hunchun in China. The opening ceremony for the new border checkpoint was attended by over 200 officials representing both countries.

Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys. The company has the largest coal reserve base in Russia and is mainly focusing on growth and cost-cutting measures.

Mechel currently retains a short-term Zacks Rank #3 (Hold).

Other companies in the steel industry with favorable Zacks Rank are Nippon Steel & Sumitomo Metal Corp. (NSSMY), Companhia Siderurgica Nacional (SID), Shiloh Industries Inc. (SHLO).  All of them hold a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SIDRead the Full Research Report on SHLORead the Full Research Report on MTLRead the Full Research Report on NSSMYZacks Investment Research